Transcript 2012 Crop Budgets: Corn, Soybeans, Wheat? Alan Miller and Craig Dobbins Purdue University is an Equal Opportunity/Equal Access institution.

2012 Crop Budgets:
Corn, Soybeans, Wheat?
Alan Miller and Craig Dobbins
Purdue University is an Equal Opportunity/Equal Access institution.
Variable Costs
(Average Cropland)
Crops
Continuous Corn
Rotation Corn
Rotation Soybeans
Wheat
Double Crop Soybeans
2010
2011
2012
%∆
$/acre $/acre $/acre 11 to 12
355
415
478
+15%
342
397
460
+16%
183
200
244
+22%
149
181
216
+19%
156
174
203
+17%
Variable Cost Changes
Rotation Corn (Average Cropland)
2011
$/acre
2012
$/acre
%∆
11 to 12
Fertilizers
151
166
+10%
Seed
99
118
+19%
Pesticides
35
38
+9%
Drying fuel
26
32
+23%
Machine fuel
23
30
+30%
Machinery repairs
14
17
+21%
Hauling
15
15
-
Interest
11
13
+18%
Insurance, Misc.
23
31
+35%
Cost Component
Variable Cost Changes
Rotation Soybeans (Average Cropland)
2011
$/acre
2012
$/acre
%∆
11 to 12
Fertilizers
69
78
+13%
Seed
59
73
+24%
Pesticides
27
29
+7%
Machine fuel
10
13
+30%
Machinery repairs
10
12
+20%
Hauling
5
5
-
Interest
6
7
+17%
Insurance, Misc.
14
27
+92%
Cost Component
Contribution Margins, 2010 – 2012
(Average Cropland)
Crops
Continuous Corn
Rotation Corn
Rotation Soybeans
Wheat
Double Crop Soybeans
2010
2011
2012
%∆
$/acre $/acre $/acre 11 to 12
271
422
413
–3%
326
495
490
–1%
287
443
364
–18%
194
394
267
–32%
122
206
157
–25%
Contribution Margin by Crop, 2012
Crops
Rotation Corn
DC Wheat/Soybeans
Continuous Corn
Rotation Soybeans
Wheat
Low
Yield
Average
Yield
High
Yield
($/acre)
($/acre)
($/acre)
345
320
280
254
229
490
424
413
364
267
663
554
571
473
333
Contribution Margin by Rotation, 20121
Crops in Rotation
Corn – Wheat/DC Beans
Soybean – Corn – Corn
Corn – Soybeans
Corn – Corn
1Sum
Low
Yield
Average
Yield
High
Yield
($/acre)
($/acre)
($/acre)
333
315
300
280
457
448
427
413
608
600
568
571
2012 contribution margins for individual crops, then divide by years in rotation.
Total Costs Per Bushel
2010 – 20121
Rotation
Low Yield
Average Yield
High Yield
$/Bushel
10
11
12
$/Bushel
10
11
12
$/Bushel
10
11
12
Rotation
4.31
4.67
Corn
Rotation
10.56 11.05
Beans
1Overhead
5.19
3.89
4.19
4.72
3.54
3.80
12.38
9.40
9.73
11.10
8.75
9.03 10.32
costs based on corn–bean rotation on 3000 acre farm.
4.28
Returns Above Total Costs
Per Acre, 2010 - 2012
Acres &
Rotation
1000-acre
corn-bean
3000-acre
corn-bean
Low Yield
Average Yield
High Yield
$/Acre
$/Acre
$/Acre
10
11
12
10
-43
81
33
-8
115
64
11
12
10
11
12
19
182 120
77
279
210
50
212 147
114
315
243
Projected Margins are Vulnerable to
Yield or Price Declines
• Market revenue declines 10% for average yield crops
• Contribution margin for corn drops $95/acre (–19%)
• Contribution margin for beans drops $61/acre (-17%)
• Contribution margin for wheat drops $48/acre (-18%)
Earnings are Vulnerable to Yield/Price
Declines & Cash Rent Increases
• If market revenue declines 10% for average yield
crops, then earnings for 3000-acre corn-bean rotation
on average land decline 54%
• Cash rent increases decrease earnings
• 10% rent increase decreases earnings 13%
• 20% rent increase decreases earnings 25%
• 30% rent increase decreases earnings 38%
How Far Down to Earnings Breakeven?
• A 19% drop in market revenue on average corn-bean
rotation equates revenues and total costs
• A 23% increase in total costs on corn-bean rotation
equates revenues and costs
• Note that the increase in projected total cost per acre
from 2011 to 2012 is roughly14%
• A 10% increase in rent increases total cost 3%
Management Implications
– Input prices will increase sending variable costs higher
– Overhead costs will increase in response to strong
contribution margins
– Potential for economic profit in excess of $100 per acre
for rotation corn and beans on average land in Indiana
– Budget reflects very strong demand for corn which may
influence rotation decisions
– Risk of margin squeeze/margin decline likely will be
significant
Questions, Comments
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